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Thursday, 3 March 2011

US Unemployment figures not expected to be much better. Dutch Unemployment figures promising, but with hidden unemployment


Tomorrow at 2.30 PM sharp the American Bureau of Labor Services (BLS) presents the latest figures about the US labor force.

Disclaimer: if you go short based on the following figures, you do it on your own risk and don’t call me when you lose money. This is an educated  guess and nothing more on my behalf!

Positive factors for the labor market:

-     The American government put through QE1 and QE2 so much money in the American economy that it should have some effects anywhere.
-     The smartphone war (Android vs Apple) and the new iPad 2 might give the consumer market a slight impuls
-     The unrest in the Middle-East can be a driver for jobs in the American energy sector

Negative factors for the labor market:
-     The unrest in the Middle-East can have a cushioning effect on growth in the making-industry, as it makes energy supply much more expensive.
-     Consumers may decide to save their money for a rainy day instead of spending it, as energy prices are exploding currently.
-     The threat of massive civil wars in the Middle-East make people feel pessimistic and pessimistic people spend less. This has a negative effect on the retail trade

My expectation: as there is still no real driver for new jobs in the American economy, the figures for February might look quite bleak. The seasonal effects of holiday season in retail are finally over now and there is still no new attitude or optimism in the labor market today. This optimism is necessary to see new opportunities. On the other hand, it is always darkest before dawn and when everybody is pessimistic, it is a great time to make money.

Combined with the unrest in the middle east and the current and future effects of this unrest on the oil and gas supply, the trend in labor will in my expectation not be positive:

-     The unemployment percentage might be a little lower to 8.9%, but I expect it to be stable at 9.0%
-     The number of added jobs has been disappointing every time over the last months. I expect it (remember: pure gutfeeling) to be disappointing too this time with less than 100,000 added jobs.
-     The current unrest in the Middle-East might be a driver for domestic jobs in the energy sector, as it might be important to be more self-supporting for the future. However, I expect this to have cushioning effects on the growth of the making-industry in the US

The Netherlands

Unfortunately The Netherlands doesn’t have a tradition of presenting the unemployment figures at the same fixed time of the month. Still I managed to grab some interesting figures from the Central Bureau of Statistics (CBS: about the unemployment situation in The Netherlands

Figure 1: Unemployment ratings
See figure 1: Since about 1.5 years the unemployment is quite stable between the 5% and 6% with a positive exception in September 2009 due to seasonal influences. The trend is going down as the export to the European countries is increasing. The trend for people receiving Unemployment Benefit is also quite stable.

Figure 2: Welfare payments to persons up to 65
The trend for people receiving social welfare is higher in general (see figure 2) and there is a relative stronger increase at people under 35 (see figure 3). This means that the category starters on the labor market that want a job, but don’t have it is growing. As they have little or no labor history, they don’t receive (much) UB.

Figure 3: Welfare payments per age category
The tricky thing with these young people is that they have:
-     Little experience in the labor market, which is a definite disadvantage for getting a job in the future, as they are aging
-     A black hole in their resumee, which no future employer will like: the double-whammy in this situation.
-     A big chance of falling in the poverty trap as an effect of the first two bullets: receiving welfare without having a chance of getting out of it. This might result in a “lost generation”.

So although the unemployment in The Netherlands is relatively low with only about 5%, there are a few ‘buts’ in these figures. The first is the growing low-aged social welfare population that has less chances on the labor market for the future.

The 2nd but is: Over the last years there was a trend, especially in the IT and the building (materials) branch of trade, to push people towards flexible contracts, temporary employment and especially freelancing. Although stimulated by the government, it was mainly a push by the employers in these businesses. If these temporary workers and freelancers have no jobs or contracts, due to the problems and stagnation in the building sector or disappearing jobs in the banking sector, they will be unemployed without being in the official unemployment figures. They cannot claim Unemployment Benefit and even claiming social welfare is impossible without liquidating their possessions. This might be a 2nd poverty trap (see figures 4 and 5)

Figure 4: small business in The Netherlands

Figure 5: small businesses per trade category
All-in-all the Dutch Unemployment figures are not bad at all, but we should beware of the hidden traps in it. For the USA in my opinion the chance for disappointing figures is greater than the chance for uplifting ones.

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